August has a reputation for being the worst month of the year statistically. And, unfortunately for investors, the seasonal phenomenon seems to be playing out again. The performance has been weak over the last week or so, due to a worrying mix of economic, geopolitical, climatic and health news all putting pressure on the markets.
Coming up, there’s another big event that could move the markets: the Jackson Hole Symposium. Let’s take a closer look at this annual event and find out what it means for your portfolio.
What is the Jackson Hole Symposium?
Every year for more than forty years, the US Federal Reserve has organised a monetary policy meeting in Jackson Hole, a small town in Wyoming.
The event, moderated by Fed Chairman Jerome Powell, will run from Thursday August 26th to Saturday August 28th. It encourages discussion on the current global economy and aims to propose solutions and guidance on monetary policy. On the program for 2021: interest rates, inflation, and recession. But most important of all is the possible reduction in asset purchases (known as tapering). Some analysts say the 2021 Jackson Hole meeting could mark the end of the Fed’s ultra-accommodative monetary policy.
Who will be there? The meeting will bring together approximately 50 central bankers, as well as government officials, journalists, academics and more. Two notable personalities will be missing, however: Christine Lagarde, president of the European Central Bank, and Andrew Bailey, governor of the Bank of England.
Why could Jackson Hole affect your portfolio?
In the last 18 months, the Federal Reserve has helped boost the economy through its asset purchase program. However, analysts are worried that if the Fed begins to ‘taper’ those purchases, the market could react negatively. However, Powell has promised to give plenty of warning before reducing the asset purchases, so there should be lots of time for investors to prepare.
Still, there could be some volatility during the week’s meeting as investors will be listening closely to the discussions and decision making.
Keep your eye on the movements of the S&P 500 Index ETF (Vanguard) which mirrors the flagship S&P 500 (a basket of 500 major US stocks). You can also watch the EU Banking Sector ETF which is exposed to 38 major European banks and whose value could fluctuate during the meeting.
All eyes on the clothing sector
Although earnings season has mostly come to an end, there are still a couple of companies left to report their figures. This week, we’ll hear from several clothing companies.
The sector has been strongly affected by the health crisis and lockdowns which have forced the closure of some businesses. Fashion industry stocks have lost 3.4% of their value on average since the start of the year. However, the boom in online shopping has allowed some brands to reinvent themselves! Also, demand is now shifting towards responsible production, with an emerging backlash towards ‘fast fashion.’
On Tuesday, August 26th, we’ll get quarterly results from Urban Outfitters, which is expected to increase profits this quarter. Last time around, the company saw earnings increase by 42.7%, putting the company on track for a 100% growth rate by the end of the year.
On Thursday, August 26th, Abercrombie could report earnings growth up to 195% year-over-year, with revenue up 23%.
On the same day, Gap will present its figures. Analysts are expecting a mixed report due to varying performance among its brands. For instance, its Banana Republic brand has seen sales drop 4% in the last year, while sales at Athleta have increased by 27%.
If you want to learn more about how to read company earnings reports like a pro, check out our full article on the subject.
Economic and results calendar
Monday – Flash PMI indices (manufacturing and services) and consumer confidence index in the eurozone.
Friday – consumer confidence index in France and Italy. Monetary meeting in Jackson Hole.
We’ll be back next week with another edition of the BUX Breakdown. In the meantime, have a great week on the markets.
The BUX Breakdown was written by Clémentine Pougnet.
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All views, opinions, and analyses in this article should not be read as personal investment advice and individual investors should make their own decisions or seek independent advice. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication.